U.S. Bonds are the king of interest rate futures and a great trading market! Here's some valuable hints and kinks taken from actual trading experiences.

When it comes to trading interest rate futures, there's no market like US Bonds! It's the most liquid and has the best price swings of the interest rates group. US Bond futures contracts are also called the "long bond" or the "30-year bond, James Bond." Trailing behind are the ten year and five year note futures, though these have gained some popularity due to the real estate “bubble.”

The full-size US Bonds future contract contains $100,000 of bonds (par value) and is controlled with about $1300 of trading account margin money. Each full point move is equal to $1,000. The mini-contract is one-half the full-size contract and is better suited for the beginning trader. Trading is on the Chicago Board of Trade, a large and reputable commodity exchange. The liquidity is excellent and the volatility makes day trading popular for both advanced and novice traders alike. Because of this deep liquidity, "at the market" stop loss orders are usually triggered with a very little slippage.

A broker friend of mine swears by US Bond option strangle strategies. This is a popular technique selling (writing) both a put and call option outside a price range, looking for them to expire worthless. Option writers look to collect the option premiums from the option buyers. The option writers want the market to stay within a range of prices while the option buyers are speculating on a large move outside this range.

A one-day US Bond contract move of three full points is probably the maximum that you will see. ($3,000 move per contract) This is a rare event usually caused by a big surprise from the Fed, the release of a government financial report or an unforeseen event. Since US T-Bond futures become most volatile around scheduled major reports, it's often wise to take your profits beforehand. Many reversals occur around these times.

The old trading adage, "first way, wrong way" means the first price reaction to a report is usually wrong. For example, a long awaited report comes out and the market immediately runs up. A few minutes later the professionals sell heavily into this rally and the market sells off sharply. This spells opportunity for sharp traders and potential losses to others.

US Treasury bond futures are presently traded electronically through the CBOT. This means you can get order fills almost instantaneously. The days of the screaming commodity pits may be limited.

Fed Fund futures trade the reverse of rates. For example, March Fed Funds futures at 95.00 would equate to traders expecting Fed fund rates to be 5% in March. (100%-95% = 5%)

The 30-year bond is one of the best indications of general interest rate direction. The trend of the fed fund rates is also key. Be sure to consider both US Bonds and Fed Funds trends in your general rates forecasts.

Treasury bonds tend to make double tops. Sell against double and triple tops when they present themselves. These long term tops don’t happen very often, so keep your eyes open. Triangles are also popular as well as head and shoulders formations. The bond market often trends well for long periods. Major multi-year government policies put these trends in motion. Fortunes can be made by accurately trading the bond market.

Here's how I look for opportunities in the U.S. Bond market: First I generate a TimeLine forecast that shows a strong move up or down. The TimeLine is based on time cycles and other preprogrammed patterns. I then determine if the move is expected to be choppy, trending, and for how long. This helps us focus on possible directional futures/option positions or writing options in a range, or even writing options with the trend.

Next I use automated option software to search for the best of 1600 strategies based on the expected market move. I compare these option to option combinations against futures to options combinations. At some point I will find a compromise between risk, profit and simplicity in one or two strategies. In hindsight there's always a best strategy we could have used. Keep this is mind when narrowing down the choices. When finished, we want to have one or two potential trades to work with. We call the selected few, "high probability, low risk trades."

Remember there is more to planning a trade than just coming up with a forecast. The market may move as predicted but we can still lose by choosing the wrong trading vehicles. Pick the right vehicles and strategies that will allow us to stay in the market without excessive fear, but still carrying calculated risk.

We NEED to take on calculated risk or the market will not pay us for our services. In addition, the vehicle has to move far enough to make a profit without letting the expense of protection eat us up. Excessive protection (risk avoidance) can come in the form of option premiums, too close-in stop loss orders - and overdone, complex spread strategies. Matching a forecast to a strategy is an important skill to succeed in commodity trading.

I read a lot about how difficult forex trading is, but making money from Forex trading is essentially simple if you keep in mind the following 4 points.

I have tried to illustrate this live and showed 3 trading opportunities and all made great profits and had low risk.

Let’s look at this simple way to make profits more closely:

1. You Are responsible

If you think you can buy an e-book and make yourself rich by paying $100 think again.

Most of the advice sold on the net is not worth the paper it’s written on. If you want to buy a system keep in mind the following:

1. Make sure the vendor trades it and has made real money and the track record is NOT just a simulation.

2. If you do buy a system make sure you know how and why the logic works:

THIS IS CRITICAL!

If you don’t know why it works you will not have the discipline to follow it and discipline is essential when trading.

If you don’t have discipline to apply it you don’t have a method in the first place.

2. A simple method

If you follow a system or build your own keep it simple.

Simple systems work best and are far better than complicated ones.

Why?

Because they are less likely to break in the face of ever changing brutal market conditions.

How simple?

We use support resistance and just 3 indicators:

Stochastics, Bollinger bands and RSI.

The best methodology to use is to utilize breakouts and sing trade within the trend.

Note: Never day trade this is a great way to lose your money quickly as you have no valid data to work with.

Finally, if you use a system like the above - always trade on confirmation from your charts to get into your position so price momentum is on your side:

Don’t guess or try and predict!

This is a mistake made by many novice traders.

3. Money management

Trading using critical support and resistance means that stops are easy to place and risk can be kept low. 4. Targets

Trade with a target where you want to take profit.

Resist the temptation to trail stops to quickly – that will simply see you knocked out the trade by volatility.

Once you have reached you target you can liquidate, or trail your stop then but not before.

Don’t make money management complicated or try and lock in profits to quickly or have stops to close this is a major reason traders lose.

This sounds to simple!

Yes it is simple - but it works.

Many traders think the more effort they put in the more they will get out of trading, but there is no correlation between the effort you make and profits you achieve.

Work smart not hard.

Trading is essentially simple and relies on a logical robust method you understand.

You will then have the confidence to apply it with discipline.

Many people try and beat the market or think they can win all the time and buy bottoms and sell tops – You cant!

The aim of forex trading is simply to make above average profits and if you keep it simple you will.

If you try and be to clever, or get to complicated in your approach you will lose.

If you saw our last live trade example on the Japanese Yen you will have seen us take a great profit swing trading the yen to the downside.

Another similar opportunity is presenting itself now.

Lets look at the opportunity and how you can take advantage.

The way to trade this is to look at key support and use the stochastic momentum indicator to enter the trade and to use the Bollinger band to indicate targets.

We have outlined how to do this in other articles.

The indicators can be seen on many free chart services and a good one is futuresource.com

We used this method to bank a great profit in the yen and 2 profits in the B Pound.

It's a simple method but it works.

The Trade

The long-term trend in the Dollar is up against the Japanese Yen but the Yen is rallying toward the 11400 level.

This is good support for the dollar.

We would key off this support.

Look at the stochastic momentum that has been down as the US Dollar has fallen.

We would look for a cross in the stochastic lines to the upside to indicate bullish divergence.

This would indicate the dollar up trend should resume.

The important point is (as in the last trade we showed you) to wait for confirmation of dollar strength above the support zone before going long.

The stochastic is the tool to use for this.

The Yen’s Problem

People keep putting great arguments for the Yen to have a bull run but it has a severe disadvantage.

Interest rate differentials.

Quite simply, these favour the dollar and unless we see a meltdown in US Equities, the dollar should remain firm against the Yen.

The alternative scenario

Is for a yen rally to emerge this would involve taking out the 11400 level. If this level is taken out on a close basis the odds would move in favour of the yen bulls.

The short side of the yen is the place to be until this happens.

The beauty of this trading

Is its simple to understand and simple to do – anyone can do it and it lets prices tell you which way trends are going to go.

You don’t act on hunches or opinions but on confirmation from price action.

Keep an eye on this trade and see what you think.

Online Forex brokers are known to be a required evil if you are going to trade in currency. There are also those people who are eligible to trade without outside assistance, but for the normal trader, enforcing to trade on the Online Forex market with no broker is like trying to chase a grizzly bear with a soup spoon. Your chances of achievement are actually very low, and there is a distinct option you would get hurt quite badly. Of course choosing the incorrect forex broker might return results same as to the sick fated bear hunt. That is why it is significant that you select a broker in the right way.

First thing to be considered is to be sure that the broker you choose has the proper qualifications. When you look at the brokerage firms in the United States, immediately exclude those that are not registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC). This is again important as this designation means that you are confined against scam and any possible abusive forex trading practices. Covering your personal security before a forex trade has been made is a high-quality way to wade gradually into the forex currency market.

Once you have removed the ones who do not have the required qualifications, and now have a short list of potential, the internet comes into picture. Just don't go with the brokerage firm, which has the best profitable, or gets the most excellent "Law and Order" individuality to assist in the following advertising, research your choices. A superior idea is to send some effective emails to your customer service people. Estimate how long it takes them to get in touch to you. This is, after all, a customer examine ambitious profession.

Once you are pleased with a firm's experience and customer service practices, its time to get down to your self-assurance tacks. Online forex trading speed is forever an issue, so find out how fast it takes your own potential online forex broker to carry out an order. Also, you would desire to know how much slippage could be expected. This needs information, which could be discovered in a phone call, or any email to customer service. You would desire these answers not only for regular markets, but for fast moving ones as well.

Movements in the Forex market are based upon the simple law of supply and demand. When there is a demand for a particular currency its price will rise and when there is an excessive supply of a currency its price will fall. Despite this seemingly simple principle, predicting movements in foreign exchange prices is not at all easy.

Today there are two main methods used to predict movements in the Forex market - fundamental analysis, which dominated the Forex market until the mid 1980s, and technical analysis, which has become increasingly popular in recent years with the arrival of new technology providing the necessary analytical tools.

Fundamental Analysis

Traders who base their predictions on fundamental analysis focus their attention on the economic, political and social factors which drive supply and demand. Their analysis is based upon such things as interest rates, inflation, unemployment and economic growth rates and from these they make an assessment of a currency's present performance and predict its future movement.

The biggest problem with fundamental analysis is that it requires the trader to constantly keep abreast of events and to analyze a huge amount of data. There is also considerable debate about just what data should be included in this analysis and just how much weight should be given to each of the various indicators.

All analysts would however agree that central to fundamental analysis is a country's balance of payments which shows the flow of money in and out of a country. In theory at least, a balance of payments of zero would produce a static price and a balance of payments surplus or deficit would cause the currency to move. For example, a balance of payments deficit indicates that money is leaving a country faster than it is coming in and would normally result in a fall in the value of the currency.

Technical Analysis

The technical analyst studies price movements and uses historical price data to predict future prices.

There are two principles to technical analysis. The first is that history repeats itself and that prices will move today according to patterns which have been well established over time. The second is that it is not necessary to study current market information to predict movements in the market as this will already be reflected in currency prices. In other words, it is the movement in the price itself which needs to be studied to predict the direction in which it is heading.

The primary tool of the technical analyst is a chart which presents a graphic representation of the market over time and allows trends to be spotted in the pattern of price movements. A wide variety of different charting techniques are used including such things as moving averages, candlestick charts, oscillators, Fibonacci retracement levels, Bollinger bands and others.